2025 Tax Changes to Know

Los Angeles County taxpayers who have been affected by the California wildfires might qualify for tax relief. To find out more, visit the IRS and California Franchise Tax Board websites.

The steps you take throughout this year will influence your tax bill next year. That's why it’s never too early to start planning for next year’s tax season. 

There are several changes to the tax code for 2025 that are likely to affect how much tax you’ll have to pay. Here are a few key updates to consider as you manage your finances throughout the year. 

To review the tax changes for 2025, you can visit the IRS's page dedicated to them. We've gathered a few notable changes below for you to consider with your tax advisor. 

 

Tax Changes Happening in 2025  

In response to inflation, the IRS has adjusted marginal tax brackets and the standard deduction for 2025. As a result of these changes, many Americans will be able to keep more of their 2025 income. 

Other big changes include increases to the allowed contribution amounts for some tax-advantaged retirement savings accounts. 

You might see a slight increase in your paychecks, depending on your withholding. This is because of adjusted tax brackets and a larger standard deduction, among other tax changes. 

Here’s a detailed look at these adjustments.

Standard Deduction Changes for 2025 

While you can use itemization to take deductions on your tax returns, the standard deductions provided by the IRS are popular for their simplicity. Standard deductions are set amounts by which taxpayers can lower their taxable income based on their filing status. 

For tax year 2025, the standard deduction for married couples filing jointly rises to $30,000, an increase of $800 from 2024. 

For single taxpayers, the standard deduction rose to $15,000, a $400 increase from the previous year. 

Heads of households, or unmarried taxpayers who have dependents and pay more than half the cost of maintaining a household, can take a standard deduction of $22,500 in 2025, an increase of $600 from 2024. 

Here's a table that breaks down standard deduction changes between 2024 and 2025:

Filing status	2023 Standard Deductions	2024 Standard Deductions
Single	$14,600.00	$15,000.00
Married, filing separately	$14,600.00	$15,000.00
Married, filing jointly	$29,200.00	$30,000.00
Head of household	$21,900.00	$22,500.00

For example, in 2025, an individual taxpayer with an income of $50,000 can take the standard deduction and reduce their taxable income to $35,000. 

Tax Bracket Changes in 2025 

With new tax brackets in 2025, some taxpayers may find that their tax bill is lower than expected. 

For example, if you earned $48,000 in 2024, you were in the 22% federal income tax bracket. But with the same $48,000 income in 2025, you might fall into a lower tax bracket in 2025 due to inflation-adjusted thresholds. 

Here’s a look at the tax brackets for 2025:

Tax Rate	Single Taxpayers	Married, Filing Jointly
37%	Incomes greater than $626,350	Incomes greater than $751,600
35%	Incomes greater than $250,525	Incomes greater than $501,050
32%	Incomes greater than $197,300	Incomes greater than $394,600
24%	Incomes greater than $103,350	Incomes greater than $206,700
22%	Incomes greater than $48,475	Incomes greater than $96,950
12%	Incomes greater than $11,925	Incomes greater than $23,850
10%	Incomes of $11,925 or less	Incomes of $23,850 or less

 

Retirement Plan Contribution Changes 

In 2025, taxpayers can increase their contributions to tax-advantaged retirement savings plans. The contribution limit for employees who contribute to 401(k) and 403(b) plans increases to $23,500 annually, up from $23,000. Employees aged 50 and over can contribute an additional $7,500, for a total of $30,500. 

The IRA contribution limit for 2025 remains $7,000 for workers below the age of 50 and $8,000 for those over 50. This is unchanged from the 2024 limit.   

Tax Credits & Deductions 

If you plan to itemize deductions rather than take the increased standard deduction described above, you may benefit from increased tax credits and deductions. While some credits remain unchanged, others—like clean vehicle credits—have updated eligibility or limits. Deductions can be varied and complicated, so looking at the IRS page about deductions and working with a tax professional can help you determine which options are right for you. 

For example, the maximum tax credit for adoption expenses remains $16,810, the same amount from 2024. 

Do You Qualify for the Earned Income Tax Credit?

Workers who earn a low to moderate income may be able to reduce their tax liability through the earned income tax credit. Those who qualify for this tax credit can use it to lower their tax bill and, in certain instances, increase their tax refund. Income limits are based on adjusted gross income (AGI).

Here are the earned income tax credit requirements for 2025:

Dependents	Maximum possible credit	Income limit for single, head of household or widowed filers	Income limit for married filing jointly filers
0	$649	$19,104	$26,214
1	$4,328	$50,434	$57,554
2	$7,152	$57,310	$64,430
3 or more	$8,046	$61,555	$68,675

 

In addition to meeting the income limit requirements above, IRS requirements for the earned income tax credit include:

• Investments in 2025 totaling $11,600 or less. 
• No foreign earned income that required form 2555 or 2555-EZ in 2025. 
• Filers must be at least age 25 and no older than 65 if filing for the credit without children or dependents. 

There are other stipulations and rules that might qualify or disqualify you from receiving the earned income tax credit. If you're not certain whether you qualify for this credit, consult IRS guidance or your tax advisor. 

Consider Tax Credit Options for Large Purchases

Taxpayers who purchase an electric vehicle in 2025 may qualify for a tax credit up to $7,500. Rather than waiting until you file taxes next spring, you can actually take the credit as a rebate when you buy the vehicle — or as a point-of-sale discount at the dealership. 

To get the clean vehicle tax credit, you must meet income limits and attest that you’re purchasing the vehicle for your own use, to be used in the United States. Not every EV qualifies, so check FuelEconomy.gov to find out whether the vehicle you’re considering will allow you to take the credit. 

 

Additional 2025 Tax Changes to Know About 

The IRS has made a variety of other changes that may affect your tax liability for tax year 2025. 

New tax threshold on capital gains. Capital gains taxes are levied on the sale of capital assets, such as stocks, bonds, real estate, and collectibles. For the 2025 tax year, individual tax filers will not have to pay any capital gains tax if their total taxable income is $48,350 or less. That’s an increase from the income threshold of $47,025 in 2024. The capital gains tax rate jumps to 15% if your income is $48,351 to $533,400. If your income is higher than that, you’ll pay 20% in capital gains if you sell your investments. 

Changes to the kiddie tax. For a child wage earner under age 19, the first $1,350 of any unearned income is tax free in 2025. According to the IRS, "unearned income" includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. The next $1,350 is taxed at the child’s rate. Any unearned income above $2,700 is taxed at the parents’ tax rate. 

Flexible spending account increases. The dollar limit for flexible spending accounts (FSA) increases to $3,300 in 2025. If you don’t use all the money in your FSA and your plan allows you to carry over unused amounts, you can carryover up to $660 in this tax year. 

Health savings account deductible increases. To qualify for a health savings account (HSA) in 2025, participants' insurance plans must meet the IRS definition of a High Deductible Health Plan (HDHP). For individual coverage, the plan must have an annual deductible of at least $1,650, with a maximum out-of-pocket expense limit of $8,300. For family coverage, the minimum annual deductible is $3,300, and the maximum out-of-pocket expense limit is $16,600. If you participate in an HSA-eligible plan, you can also contribute more in 2025: up to $4,300 for individuals and up to $8,550 for families. Individuals aged 55 and older can make an additional $1,000 catch-up contribution.

Increased foreign earned income exclusion. If you earn income in a foreign country or from an employer in a foreign country, you may benefit from the foreign earned income exclusion, which remains $126,500 in 2025. 

Estate exemption increase. If a family member dies during 2025, their estate has a basic estate tax exclusion amount of $13.9 million, an increase from $13.6 million for estates owned by people who died in 2024.   

Gift tax exclusion increase. If you want to give money to friends or family members, you can give up to $19,000 to each individual in 2025 before incurring gift tax. That’s an increase over the $18,000 exclusion in 2024. 

While it's important to educate yourself, it can be even more helpful to work with a tax professional when it comes to navigating the constantly changing tax code. If you have other financial needs, our wealth planners are available to collaborate with you and your tax advisor.